Closing any form of business can be more complicated than most people think. It’s not easy shutting down anything you worked relentlessly to achieve, but sometimes, that could be your best option. The process of closing an LLC business can be stressful especially if it’s a multi-member LLC. However, it is imperative to take a quiet time to think about how to close the business the right way. Remember you could get into problems for failing to close your business correctly.
Officially dissolving an LLC is crucial so that you are not personally held liable for all the business’ unpaid debts, taxes and the annual fees levied by states. You can follow these steps to dissolve your limited liability company the right way:
- Decide to close the business
The first step to closing an LLC is for the members to make a formal decision to do so. To achieve this, a meeting needs to be convened for the members to vote in favor of the decision. When it comes to voting to dissolve an LLC, the laws vary from state to state with some states requiring a majority, two-thirds of the votes or just a unanimous written agreement by the LLC members.
- Make your decision official
After deciding to dissolve your LLC, the next logical step to take is to notify your state Secretary of State through their website. You are expected to fill and submit a form that formally closes your LLC to your state’s Secretary of State website.
- Notify the public
It is also imperative to notify the public, including all your creditors about your decision to dissolve your LLC. This will help your creditors decide whether or not to file a lawsuit against your company and the time frame to do so. When it comes to the official notice, each state has its own requirements, so check with your state to find out how much notice you need to give and whether you should announce it on radio, newspaper or TV.
- Wrap up finances
If you have decided to dissolve your LLC, you also need to wrap up all your finances by paying all your outstanding bills and debts. Note that you are required to pay all your debtors before distributing the LLC’s assets to its members. All the members of an LLC are liable to the creditors of the company, so these creditors need to be paid before the members can take the remaining assets.
- Shut down things that are related to the company
After wrapping up your finances, you also need to shut down things like your bank accounts and cancel your insurance policies as well as all the permits, licenses and registrations that your LLC hold. But you will need to keep copies of all these things in a safe place for future audit purposes.
- Complete taxes
You can only close a limited liability company completely by filing a final tax return with the state and the IRS. To this effect, it is imperative to shut the LLC’s tax accounts with both the state and the IRS after ensuring that your payroll withholding and sales taxes are updated and funded correctly.
- Divide your assets
The members can then divide the assets among themselves after handling all their debts and taxes. The assets are expected to be divided according to what is stated in the LLC’s operating agreement. However, the members may decide to sell some of the assets before dividing the rest.